Employer-Sponsored Health Insurance Rose in Massachusetts Post Reform; Individual Mandate, Tax Exclusion Influenced Decisions, Finds PwC's Health Research Institute
NEW YORK, May 13, 2013 /PRNewswire/ -- In the seven years since Massachusetts enacted its universal healthcare law, the number of people covered by insurance through the workplace increased, running counter to nationwide trends at the same time. PwC's Health Research Institute (HRI) today released the first of a two-part series called, The Massachusetts Experience, examining the real-world implications of health reform in the first state in the nation to move forward with a broad expansion of coverage. The first installment focuses on shifts in the employer-based market and details the financial implications of the federal tax exclusion for health insurance.
"While each state and industry is different, Massachusetts' experience may offer clues into how health organizations, the business community and individuals might react to elements of the Affordable Care Act set to take effect in 2014," said Robert Valletta, PwC U.S. healthcare provider leader based in Boston. "Despite concern that the Affordable Care Act signals the end of employer-sponsored health coverage, our analysis of the Massachusetts experience paints a more complex picture."
Employer-sponsored insurance rose about 1 percentage point in Massachusetts while the national rate fell by 5.7 percentage points. The Massachusetts growth occurred in the midst of the recession and at a time when health insurance premiums in the state rose to the highest levels in the nation. HRI's in-depth analysis of the Massachusetts experience -- and the impact of the tax exclusion -- found that employer-sponsored insurance is often financially beneficial to both employers and employees.
"Health insurance benefits are a significant part of the total compensation package for a workforce, and that's not likely to go away when the Affordable Care Act goes into full effect," said Michael Thompson, PwC U.S. human resources services principal focused on healthcare. "Employer-sponsored coverage will continue to be a critical pillar of the U.S. health system, and it has been an important part of employer strategy to attract and retain talent, and promote improved health and productivity. Most employers see this return on investment, alone, as a compelling reason to continue offering coverage."
According to HRI's analysis and interviews with experts in Massachusetts, two key factors shaped the Massachusetts experience: the individual mandate, which drove up demand for coverage, and the tax implications for both employers and employees.
The analysis found that for Americans earning more than 400 percent of the federal poverty level, or about $45,960 for an individual, a combination of salary and health benefits obtained through an employer is likely to be a more efficient way to be compensated. It also found that due to federal tax exclusions, businesses can save thousands of dollars per employee by using that compensation strategy.
HRI's analysis includes a case study that illustrates the tax implications for employers and employees. The second report on the Massachusetts Experience, to be released later this month, will take a closer look at the implications for state's hospitals, physicians and insurers.
To download the report, view video interviews and see an illustrative example, visit: http://www.pwc.com/us/Massachusettshealthreform.
About PwC's Health Research Institute (HRI)
PwC's Health Research Institute provides new intelligence, perspectives and analysis on trends affecting health-related industries. HRI helps executive decision makers navigate change through primary research and collaborative exchange. Our views are shaped by a network of professionals with executive and day-to-day experience in the health industry. HRI research is not sponsored by businesses, government, or other institutions. For more information, visit www.pwc.com/hri.
About PwC's Health Industries Group
PwC's Health Industries Group is a leading advisor to public and private organizations across the health industries, including healthcare providers, pharmaceuticals, health and life sciences, payers, employers, academic institutions and non-health organizations with significant presence in the health market. For more information, follow PwC Health Industries at @PwCHealth or visit www.pwc.com/us/healthindustries.
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SOURCE PwC US